An old argument against patents

In our partner meeting today we were discussing the patent strength of a potential investee company. In a sign of how crazy patents have become the important thing to us what not the quality of the invention that had been patented but the extent to which the patents might drive value on exit. This is the latest in a long line of examples of patents not really being about innovation any more, and why I think that software patents now act as a brake on innovation.

After our partner meeting I came across an old argument against patents that was new to me. It dates to 1934 and belongs to an English economist called Arnold Plant. I read it on the Becker Posner blog:

[Arnold Plant argued] that patents distort innovations in favor of goods and processes that can be patented and away from innovations that cannot be patented. His favorite example of the latter is basic research in the sciences that produced the theory of relativity, the theory of evolution, and in more modern times our understanding of DNA and genes. He believed that the patent system induced some creative scientists to work in areas that could be patented rather than on basic scientific research that could not be patented.

That’s another nail in the coffin for me. Patents have their uses, for example in the pharmaceutical industry, but they are not serving the tech industry well and the system needs reform. The Becker Posner post I mentioned above has a reasoned argument about the pros and cons of patents and makes the suggestion that patents be eliminated on anything that is not expensive to develop and cheap to eliminate. The process of change could be tackled piecemeal, starting small in less controversial areas and spreading if it is successful in increasing innovation. That seems sensible to me.

  • Andrew Hall

    The distortion of markets by patents is about to notch up a gear with the introduction of the Patent Box corporation tax break in the UK. If any part of a product a company sells is protected by a patent they own, then they pay a much lower rate of corporation tax. Patent lawyers and accountants are urging companies to create narrow patents to ensure rapid registration of the patent and thus achieve large tax savings. So patent madness is about to get much worse!

  • http://www.theequitykicker.com brisbourne

    Gulp

  • http://www.theequitykicker.com brisbourne

    Hi Nick, Thanks for the comment. I hear that you value patents and see a symbiosis between innovation and IP protection. I’d love for you to elaborate on how that symbiosis works in the area of software patents. It seems to me (and many other better informed participants in the tech ecosystem) that on balance the bad side of patents (trolls, imbalance of power between small and large companies, overlapping claims and uncertainties, and patent strategies designed to prevent competing innovation rather than copying) outweigh the good side (encouraging investment). It is telling that most of the best software companies these days are able to rely on their ability to continuously innovate as a means of staying ahead.